May 27, 2011

Body of Proof That Tax Increases Aren't the Way to Go

Justin Katz

Many Rhode Islanders aren't completely sold on the economic benefits of giving away tax credits to TV and movie productions, and some of those who are seem to think the benefit has more to do with notoriety. Still, it's reasonable to count this as high-profile evidence of the effect of attempting to solve the Rhode Island government's financial problems through revenue increases, rather than spending reductions:

ABC-TV has received approval for a $7-million tax credit for filming "Body of Proof" in Los Angeles, the director of the California Film Commission tells the Los Angeles Times. ...

"They have indicated they are moving the show, and will start filming in Los Angeles in mid- to late July," Amy Lemisch, the film commission's director, told the Times in a story published Tuesday. ...

Network TV series like "Body of Proof" can qualify for California's film-tax program only if they are moving to California from another location, the Times said. The show also received tax credits in Rhode Island during its first season, but Governor Chafee's proposed budget — now under discussion in the General Assembly — calls for eliminating the credits.

Even a casual observer of the entertainment industry can assume advantages to setting up shop in California, beyond tax credits, and it's not improbable that the operation came to Rhode Island for a season to test the TV audience and then move to California as an "moving" operation, per the rules of CA's tax credit. Still, the possibility of finding its RI credits evaporating couldn't have done otherwise than eased the decision. More importantly, that it's such an obvious thing for observers to consider as a possible reason illustrates how obvious such factors are for decisions being made across the economy.

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While I cannot now recall the figures, Massachusetts did a study on the benefits of offering tax credits for TV and movie production. While it was found that there were some intangible benefits, auch as allowing politicians to socialize with celebrities, no direct econmic benefit could be found. Quite simply,the cost outweighed the benefits. There was also quite a lot of discovery that the unions, particularly the Teamsters, were fleecing the production companies.

Part of what was found was that other states could not compete with California on assets essential to production, such as sound stages. The end result was that only certain locations and "establishing shots" were filmed in Massachusetts.

Posted by: Warrington Faust at May 27, 2011 8:14 AM

If we reinstate that giveaway maybe we can improve our economy, just like California.

Posted by: Tommy Cranston at May 27, 2011 8:36 AM

We do also have sound stages here. A couple of movies have been completely filmed in them. Dean Warehousing has actually set up an LA-like sound stage in Cumberland.

I don't see how having any business come to RI can be a bad thing. I think the business that the Tourism Council or Chamber of Commerce might be missing out on is celebrity spotting. Make it attractive for people to come and watch the productions. I used to work in lower Manhattan, right by the courthouse where they film Law & Order and lots of people would enjoy watching all that. Sure, that's NYC so you get people anyway, but why not try to add this as a tourist attraction to RI?

Posted by: Patrick at May 27, 2011 8:48 AM

"I don't see how having any business come to RI can be a bad thing"

Actually, it can. If we have to bend over backwards to give kickbacks and subsidies to one group, those funds must be raised from another. While the movie tax credit allowed politicians to create something tangible they could tout, they made the overall climate here that much worse.

It's like living near a coal plant vs. a nuclear plant. The nuclear plant is much 'safer', because the coal plant kills everyone downwind just a -little bit- every day.

So maybe the credit did create 200 jobs, but the taxes to issue it might have boiled-off 500 other jobs elsewhere. If you think the answer is tax credits, you're always going to be chasing your own tail and someone else will always beat you in the end. The answer would be to -eliminate- all the various industry-specific legislation and lots of ancient regulation to clear the path for the market to do its thing.

Patrick, we both work next to a once beautiful (now abandoned) massive structure that tax credits were issued to re-develop. The developers took the money and skipped town after removing the roof; the building's been filling up with water and vagrants for three years. That's what happens when you issue 'credits' for specific things. The wheels of our government work too slowly to keep on top of our economy, and the influence of powerful insiders is too strong to expect the credits to be doled-out on merit. I think our government, with its strict limits and checks-and-balances, is -designed- to be too slow to attempt the kind of government-assisted economic development we see in countries that are a little less 'free'.

Posted by: mangeek at May 27, 2011 10:31 AM

Patrick writes:

"I used to work in lower Manhattan, right by the courthouse where they film Law & Order and lots of people would enjoy watching all that."

I used to live on Mt. Vernon St, on Boston's Beacon Hill. 5-6 times a year it was shut down to permit filming of "establishing shots" for movies and TV series. What this meant to me is that I couldn't go home. I would have to pay $30.00 a night to park my car, and then walk 10-15 blocks home. Sure, this is small of me. And doubtless I received an intangible benefit. But, we all look to our own interests.

Posted by: Warrington Faust at May 27, 2011 10:48 AM

Tax credits to certain businesses are just another form of government picking winners and losers in the economy, i.e. central economic planning, which always ends in disaster. Requiring businesses to kiss the ring of our governor and GA leaders in order to receive sweetheart tax breaks just reinforces RI's reputation for political corruption and erratic governance that keeps most businesses away in the first place. It also gives certain companies unfair competitive advantages over others and could easily hurt local smaller businesses that way.

Posted by: Dan at May 27, 2011 11:11 AM

Plus, most of the key people (actors, directors, producers, etc.) are based in Hollywood, and looking for any excuse to work close to home (especially if they have families). I'd be willing to bet they'd have gone back to Cali even if we kept the tax credit, and that same scenario is taking place in other states where TV shows are shot. Look at the law - Cali wants to steal existing productions instead of supporting new ones.

Posted by: bella at May 27, 2011 2:38 PM

I wouldn't spend $75 of my own money on a video game, but the EDC is more than happy to spend it for me and send me the bill.

As for the I-95 bridge in Pawtucket... I'd gladly spend $80 to have that back at full capacity. I would have rather just spent $2-3 a year and not have to rebuild the whole thing.

Posted by: mangeek at May 27, 2011 3:57 PM
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